The post-pandemic rental growth recovery came to an abrupt end in the first quarter of 2024, with national growth falling to 3.8% from 4.6% in the previous quarter, according to the latest quarterly PayProp Rental Index. This is the largest slump in rental growth rates since the pandemic.
Conditions are likely to get worse before they get better, says Johette Smuts, head of data analytics at PayProp, as prospects for a rate cut later in the year are now receding.Prime lending rates are now at a 15-year high, and this has taken its toll not just on the rental market, but on the volume of new home buyers – many of whom appear to be waiting for an interest rate drop before buying.The 3.8% increase in Q1 2024 rental growth is the lowest since Q4 2022.
The dilemma for the Sarb is whether to cut interest rates to make borrowing cheaper and stimulate economic growth at the risk of unleashing further inflationary pressures.Rents grew by 9.1% in the Free State year on year, the second fastest of any province. This was higher than the 8.8% of Q4 2023, making it one of just two provinces with accelerating rental growth, says Smuts.
KwaZulu-Natal set an unenviable record in Q1 2024, becoming the first province to experience negative rental growth since the Free State in Q1 2023. Rents shrank by 0.4%, going from a quarterly average of R8 801 in Q1 2023 to R8 770 in Q1 2024.